2018 (3) TMI 899 - HC - Income Tax

Addition u/s 40A - purchases of meat in cash in excess of ₹ 20,000/ - whether assessee has fulfilled the condition laid down in Rule 6DD? - Tribunal deleted the addition - Held that - The basis of the Revenue seeking to deny the benefit of the proviso to Section 40A(3) of the Act and Rule 6DD(e) of the Rules is non satisfaction of the condition provided in CBDT Circular No.8 of 2016. Non furnishing of a Certificate from a Veterinary Doctor. The proviso to Section 40A(3) of the Act seeks to exclude certain categories / classes of payments from its net in circumstances as prescribed. Section 2(33) of the Act defines prescribed means prescribed by the Rules. It does not include CBDT Circulars. It is a settled position in law that a Circular issued by the CBDT cannot impose additional condition to the Act and / or Rules adverse to an assessee. In UCO Bank Vs. Commissioner of Income Tax 1999 (5) TMI 3 - SUPREME Court as observed Also a circular cannot impose on the taxpayer a burden higher than what the Act itself, on a true interpretation, envisages . Thus, the view of the Tribunal that the CBDT Circular cannot put in new conditions for grant of benefit which are not provided either in the Act or in the Rules framed there-under, cannot be faulted. - Decided against revenue

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act, 1961 for Assessment Year 2009-10. Interpretation of Rule 6DD of the Income Tax Rules in relation to cash payments for meat purchases exceeding ?20,000. Compliance with conditions of CBDT Circular No.8 of 2016 for benefit under Section 40A(3) of the Act.

Analysis:

1. The appeal challenges the Tribunal's order regarding cash payments exceeding ?20,000 for meat purchases under Section 40A(3) of the Act for Assessment Year 2009-10. The central question raised is whether the assessee fulfilled the conditions specified in Rule 6DD despite non-compliance with CBDT Circular No.8 of 2016.

2. The respondent, a partnership firm engaged in exporting frozen buffalo and veal meat, made cash purchases of raw meat exceeding ?20,000. The Authorities disallowed these payments under Section 40A(3) of the Act, citing non-compliance with CBDT Circular conditions, specifically the requirement for a certification from a Veterinary Doctor.

3. The Tribunal held that as per Rule 6DD(e) of the Rules, if payments are made in cash for the purchase of animal husbandry produce, the conditions are satisfied. The Tribunal emphasized that the Act and Rules do not mandate compliance with additional conditions imposed by CBDT Circulars, as Circulars cannot impose burdens beyond statutory provisions.

4. The Revenue argued that non-compliance with CBDT Circular conditions should disqualify the assessee from the benefit of Section 40A(3) and Rule 6DD(e). However, the Court clarified that Circulars cannot add new conditions not present in the Act or Rules, especially to the detriment of the assessee. The rejection of a Veterinary Doctor's certificate solely due to form issues was also noted.

5. The Court dismissed the appeal, stating that the proposed question did not raise any substantial legal issue. Consequently, the Tribunal's decision allowing the assessee's appeal was upheld, emphasizing that the CBDT cannot legislate to deprive an assessee of statutory benefits under the Act and Rules.

6. In conclusion, the appeal was dismissed, with no costs awarded. The judgment reaffirmed that compliance with Rule 6DD of the Rules sufficed for the assessee to avoid disallowance under Section 40A(3) of the Act, irrespective of CBDT Circular conditions not met due to form-related reasons.